Nowadays, you can purchase several services and products with your cryptocurrencies. This includes event tickets, college degrees, food, drinks, cars, and so much more. Since the popularity of these coins is as high as it ever was, there is this assumption that professional services are going to be available with crypto payments. But, this is not actually the case. Munley Law specialists highlight why in the following paragraphs.
Paying Professional Services With Cryptocurrencies
Traditionally, professional service providers have been quite reluctant when it comes to accepting crypto payments. This does include law firms. There are two main reasons for this:
· A potential link between money laundering and cryptocurrencies.
· The huge volatility of cryptocurrencies.
In reality, crypto coins like Bitcoin are use far less than cash for laundering money. As an example, in 2020, we saw illegal activities on the blockchain being only 0.35% of all transaction volumes. Obviously, some risk does exist. However, if the law firm would undertake due diligence, this risk can easily be mitigated.
When talking about volatility, risk management can offer a security blanket. The simple way to get rid of volatility as a problem is to use a stablecoin, which would be fixed under a currency like the USD. To keep it simple, this is a cryptocurrency, just like ETH or BTC, but it is connected to a specific fiat currency. Also, it is usually backed by some sort of asset like cash in order to guarantee stability. You can easily convert cryptocurrencies to other cryptocurrencies. This includes stablecoins and law firms could use this to deal with the potential volatility of the regular cryptocurrencies.
What is interesting is that converting to the stablecoin can easily be decided by the attorney and the client. Professional service providers can easily arrange their payments with the use of a chosen stablecoin without having to deal with the risk of volatility. The 3 best examples of good stablecoins to use are DAI, USDC, and USDT.
Proving Funds Availability And Source
Law firms have to verify where funds come from and whether they exist or not. In order to prove funds sources when playing with cryptocurrencies, the process tends to be more complicated. Just as with shares and stocks though, there are online records that can be used when it comes to determining if the value of the funds grew as they should. As an example, you can use CoinMarketCap to see the price of Bitcoin at any point in time. Then, you can combine this information with data about how the cryptocurrency was stored to determine if there is something that hints towards illegal activity or not.
Unfortunately, determining value is not enough. The client still has to explain exactly where funds initially came from when the crypto coins were bought. For instance, they can come from inheritance, as a gift, from salary, or from savings. Documentary evidence should be required as support.
Cryptocurrency payments are not popular when it comes to paying a law firm for the services offered. However, as technology evolves and more technology is developed, this might become a reality. We still need some improvements when it comes to regulations but it is expected that even law firms will accept Bitcoin payments in the future.